When support had me try the video with the original install disk (10.4.8) above, there was no distortion in the video.

But now when I try to install the snow leapord from via my USB drive (which is how I had installed it earlier), the distortion shows up immediately on the first install screen (where you are asked to choose the language).

So apparently, the video has stopped liking snow leapord, even when I try to install it fresh, though it had been working just fine with snow leapord for the last 6-7 months! But it is ok with mac osx 10.4.8 that came with the macbook.

I tried this 2-3 times alternating the install OS, everytime the result is same.